Monday, May 16, 2011

Music Business/Law Tips - "Performance Royalty" (Part 1)

There are several ways that songwriters can make money in the music business. One of the most significant is from royalties generated by the public performance of their songs. These royalties result from what are called "performance rights".

In the United States, "performance royalties" are paid out mainly by three performance rights societies, BMI, ASCAP and SESAC (most foreign countries also have their own societies). Under the copyright law, a songwriter controls the public performance of that songwriter's songs. In essence, a songwriter designates either BMI, ASCAP or SESAC as his or her agent for the public performance rights of that songwriter's songs. A songwriter can only affiliate with one society at a time. BMI, ASCAP and SESAC have arrangements with the parties - such as radio, television, concert venues, restaurants, etc. (essentially any user who performs music publicly) - who want to use the songs in the societies respective catalogs. For a licensing fee, BMI, ASCAP or SESAC will grant to that user what is called a "blanket license", which means that the user can play any song, by any songwriter or publisher affiliated with that society, any number of times. It must be stressed that fees are collected from the entity or venue user, not from any actual performer.

The money earned by a songwriter from the societies (i.e., the performance royalty) is proportionate to the volume of airplay or performances of the songwriter's songs. Performance royalties are based on extremely complicated formulas. Basically, however, the societies monitor radio and television airplay to determine how often a song is heard and by how many people. The larger the audience and the more times a song is played, the more the income. Since it is impossible to cover all media outlets, BMI, ASCAP and SESAC rely on estimates based upon samples as well as data tracking software. After deducting operating expenses, the societies divide the fees up and pay it to their affiliated writers and publishers. The societies pay quarterly.